Asia Reshapes the Oil Industry
Asia is reshaping the global oil industry, with Russian oil exports to China and India witnessing a substantial surge in recent months. Amid changing dynamics, countries like Russia, Iran and Venezuela have steadily increased their oil exports, while restrictive customs policies have driven these exports primarily to China and India. This shift in oil trade patterns is reshaping the global energy landscape.
According to Bloomberg, more than 30% of China and India's combined oil imports now come from Russia, Iran and Venezuela, marking a 12% increase compared to February 2022, when Russia invaded Ukraine. As the supply chains adjusted following geopolitical disruptions, Asian nations turned to alternative sources for their oil needs.
Exports from Western Africa and the US have experienced a decline of 40% and 35%, respectively. This decline highlights the shifting demand patterns and preference for alternative suppliers in Asia. Geopolitical developments have prompted a reevaluation of energy strategies among major economies.
Furthermore, the upstream sector is poised for substantial growth in greenfield investments in the coming year. Rystad Energy predicts that global upstream oil and gas CAPEX will reach US$151 billion in 2023, reflecting a 10% increase compared to 2022. This surge in investments underscores the industry's commitment to expanding production capacities and exploring untapped reserves.
The offshore oil and gas industry is also expected to witness significant greenfield investments, with projections exceeding US$200 billion by 2025. This investment surge reflects the industry's commitment to capitalizing on offshore reserves and adopting new technologies for efficient exploration and extraction.
Mexico, a key player in the oil industry, has shown promising production growth. Jorge León, Senior Vice President in Mexico, Rystad Energy, noted that Mexico's production has surpassed 1.9MMb/d and could reach a production rate of 2MMb/d. This increase demonstrates Mexico's commitment to strengthening its position in the global oil market.
However, financial priorities are set on ESG efforts which is driving financing away from the industry sector. BNP Paribas has joined HSBC as it decided to discontinue direct financing for new oil and gas projects, reinforcing its commitment to sustainable finance. This move makes BNP Paribas the second-largest global bank to take such a step.